MomentumOptions.com Pre-Market Update for 2/1/2021
Bears Return as Volatility Hits Monthly Peak/ Profit Alert (WU)/ Trade Alert (MGM)
The stock market was weak again on Friday session with the losses giving the major indexes their biggest weekly losses since October. Traders digested the ramifications of Johnson & Johnson’s (JNJ) coronavirus vaccine trial results, while an ongoing between Wall Street hedge funds and retail investors over Gamestop (GME) added to the spike in volatility.
The Nasdaq closed at 13,070 (-2%) following the intraday drop to 12,985. Prior and upper support at 13,000-12,900 was breached but held. A move below the latter would indicate a retest towards 12,800-12,700 and the 50-day moving average.
The Dow ended at 29,982 (-2%) after tagging an intraday low of 29,856. Upper support at 30,000-29,750 was breached and failed to hold on the close back below the 50-day moving average. A close below the latter would signal further weakness towards 29,500-29,250.
The S&P 500 settled at 3,714 (-1.9%) with the second half fade reaching 3,694. Prior and upper support from the start of January at 3,700-3,675 was breached but held on the close back below the 50-day moving average, as well. A move below the latter would suggest additional weakness towards 3,650-3,625.
The Russell 2000 finished at 2,073 (-1.6%) after trading to a midday low of 2,066. Near-term and upper support at 2,080-2,060 failed to hold. A drop below the latter would signal a continued backtest towards 2,050-2,030. Below is a chart of the IWM.
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was up for the fourth time in six sessions after zooming to an intraday and fresh monthly high of 37.51. Current and lower resistance at 37-37.50 was breached but held.
Support is 32.50-32 followed by 30.50-30.
The S&P 400 Mid Cap Index (NYSE: MID) was down for the second-straight session after testing a low of 2,333. Fresh and upper support at 2,350-2,325 failed to hold. A close below the latter would indicate further weakness towards 2,300-2,275.
Resistance is at 2,375-2,400 followed by 2,425-2,450.
RSI (relative strength index) is in a downtrend with upper support at 45-40 failing to hold. A move below the latter would signal additional weakness towards 35-30 and levels from late September. Resistance is at 50.
The Materials Select Sector Spider Fund (NYSE: XLB) was down for the sixth time in seven sessions with the intraday low tapping $70.28. Near-term and upper support at $70.50-$70 was breached but held. A close below the latter would indicate a retest towards $69-$68.50 and levels from mid-November.
Resistance is at $71.50-$72 and the 50-day moving average.
RSI is back in a downtrend with key support at 35 holding. A close below this level would suggest further weakness towards 30-25 and prior lows from last March. Resistance is at 40.
We closed out our 19th-straight winning trade since mid-August and our first triple-digit winner for 2021. However, our other current bullish positions have me worried, given the current market conditions. I have been preparing for a major pullback as February is typically a weak month for the stock market. The spike in volatility confirms some this.
With the S&P 500 and the Dow testing their 50-day moving averages, there is a good possibility the Nasdaq and Russell 2000 will follow. While there is likely an opportunity to add some put positions, let’s see how the week starts off before getting too aggressive.
Momentum Options Play List
Closed Momentum Options Trades for 2021: 3-1 (75%). All trades are dated and time stamped for verification. New subscribers can look at the past history to see how the trades have played out or to research our Track Records. Do not risk more than 5% of your trading account on any one trade but do try to take all of the trades.
Please remember, all “Exit Targets” and “Stop Targets” are targets. You should not have any “Stops” entered to close any trades or “Limit Orders” in your brokerage account unless I list one. I will send out a “Profit Alert” or “New Trade” if I want you to close a position or if a new trade comes out. Otherwise, follow instructions at all times in the Daily updates and Text Alerts.
Western Union (WU, $22.27, down $0.66)
WU March 23 calls (WU210319C00023000, $0.90, down $0.45)
Entry Price: $0.65 (1/21/2021)
Exit Target: $2 (closed half at $1.50 on 1/27/2021)
Stop Target: $1.10 (Stop Limit)
Action: The Stop Limit on the other half of the trade tripped on Friday’s drop to $22.24. We can revisit WU if shares can clear the $23.75 level at some point and last week’s double-top.
AT&T (T, $28.63, down $0.17)
T February 31 calls (T210219C00031000, $0.15, down $0.05)
Entry Price: $0.40 (1/6/2021)
Exit Target: $0.80
Stop Target: None
Action: Friday’s low reached $28.57 with upper support is at $28.75-$28.50 failing to hold. Resistance is at $29-$29.25 and the 50-day moving average.
Boston Scientific (BSX, $35.44, down $0.90)
BSX February 31 puts (BSX210219P00031000, $0.15, up $0.05)
Entry Price: $0.85 (12/14/2020)
Exit Target: $1.70
Stop Target: None
Action: Shares tested a low of $35.04 with prior and upper support at $35.25-$35 getting breached but holding. Lowered resistance is at $36-$36.25.